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Do cash discounts traditionally apply to the entire invoice amount (including freight and taxes) or just the amount related to the product/service?

Mark Lawton's Profile


Topic Expert
Brenda Goudey
Title: CFO/VP of Finance
Company: KDR Designer Showrooms
(CFO/VP of Finance, KDR Designer Showrooms) |

In my experience, primarily with distributors in Missouri, prompt payment discounts only apply to the merchandise amounts, not freight and certainly never taxes.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

If I am configuring my ERP for Customer cash discounts (i.e. settlement of invoice faster), then I agree with Brenda's comment.
If the terms from my vendor are silent, I will regard the discount as applying to the amount due (i.e. the invoice total) when I process my AP payments.

Ray Calabrese
Title: Treasurer
Company: Interim Treasurer
(Treasurer, Interim Treasurer) |

Sounds like it depends on your perspective. I would agree with Brenda and go back to Len for short paying his freight .

Topic Expert
Bob Stenz
Title: Controller
Company: Silicon Valley start-up
(Controller, Silicon Valley start-up) |

Just the amount related to the product/service as the added amounts for freight/taxes are often out-of-pocket costs (i.e. little to no margin) to the selling company.

Topic Expert
J.D. Floyd
Title: Owner, CFO
Company: CFO Outsourcing Solutions, Inc.
(Owner, CFO, CFO Outsourcing Solutions, Inc.) |

Merchandise only; taxes & freight are always pass through items. For example, When you look at contractual items such as specialty manufacturing or mining/extraction you will see clear language that any discounts offered, applied or taken cannot be associated to things such as taxes, freight, accessments or other pass through items.

J.D. Floyd


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